Things That Make You Go Hmm…About Indexing


Past performance does not guarantee future results. Indexes are unmanaged baskets of securities in which investors cannot directly invest; they do not reflect the payment of advisory fees or other expenses associated with specific investments or the management of an actual portfolio.
International and emerging markets involve additional risks, including, but not limited to, currency fluctuation, political instability, foreign taxes, and different methods of accounting and financial reporting. As a result, they may not be suitable investment options for everyone. Emerging Markets represents securities in countries with developing economies and provide potentially high returns. Many Latin American, Eastern European and Asian countries are considered emerging markets.

March, 2014: MSCI’s China A-share Index (MSCI China A International Index) Hovers Around $28001
At the time of the above headline, index provider MSCI announced a roadmap to add China A-share to its Emerging Markets Index in 2015.2 I personally recall this announcement being a big deal! Why? Well, the Chinese A-share marketplace is notorious for discriminatory quotas against foreign investors, among other detractors.
This was a significant decision for a $1.7 trillion index as it implied that roughly $22 billion would be invested in China by fund managers based on the new, estimated 1.3% index weight to China A-shares.3 Continue reading

“The IMF Threatens to Kill the U.S. Dollar” and other Fear Tactics

The dramatic title above echoes a trend of recent articles we’ve seen preying upon fears that the U.S. will lose its spot as the default global currency of choice. Recent announcements by the International Monetary Fund (IMF) have talked about potentially adding the Chinese yuan as an official reserve currency. The hot take from this has been to infer that it means the U.S. is getting knocked out of the top spot. However, many investors don’t realize that the IMF already considers the euro, yen and sterling as reserve currencies alongside the dollar. The inclusion of the Chinese yuan into the reserve assets of the IMF is more of an acknowledgement to the growing size of the world’s second largest economy (China) than any type of a knock against the dollar. It will not change the fact that the U.S. dollar is still the default for most international financial and commodity transactions. Continue reading

Why Are You Buying Gold?

Source: Siegel, Jeremy, Future for Investors (2005), With Updates to 2014 Data is from Jan. 1, 1802 – December 2014. Hypothetical value of $1 invested on January 1, 1802 and kept invested through Dec. 2014. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Stock investing involves risks, including volatility (up and down movement in the value of your assets) and loss of principal. Investors with time horizons of less than five years should consider minimizing or avoiding investing in common stocks. Bonds are subject to market and interest rate risk. Bond values will decline as interest rates rise, issuer’s creditworthiness declines, and are subject to availability and changes in price. The price of gold may be affected by global gold supply and demand, currency exchange rates and interest rates. Investors should be aware that there is no assurance that gold will maintain its long-term value in terms of purchasing power in the future. T Bills are backed by the US government and are subject to interest rate and inflation risk. T Bill values will decline as interest rates rise. The value of the U.S. dollar depreciates over time with inflation, so the primary risk is inflation risk.

This blog is from the September issue of Portfolio Perspectives.
I don’t know about you, but lately my newsfeed has been inundated with headlines and stories about gold. It seems many of these articles are written or sponsored by someone trying to get me to buy the shiny metal. Many make the same cliché claims about why gold is a wise investment: it provides safety during financial crises, it hedges against inflation and it creates wealth. Unfortunately, these claims encourage people to buy gold for the wrong reasons. Continue reading

(Feed) Forward Thinking for Your Practice

In any relationship-based business where growth’s a priority, two questions should come to mind: What do my clients truly value — and what might both prospects and clients need in the future? If you’re like many small business owners, the answers are likely illusive. And in many cases your clients’ answers may have evolved over the course of their relationship with you. So what’s the best way to better understand what your clients think about your services? Continue reading

Buy Low Sell High – Easier Said Than Done

Blog_Sell_High“Buy low sell high” – it sounds so simple when you say it out loud. Yet in practice it’s one of the hardest things to do if you let your emotions get in the way.
We tend to view investing through a different lens than many other aspects of life. For example, if we were in Costco looking to buy a new TV, we wouldn’t get upset if a worker came up and knocked 20% off the price. In fact, we’d probably hurry to get to the register, knowing we were getting it at a better price than the day before. So why is that when it comes to investing we often run from falling prices, wanting to own stocks only when the market hits new highs? Continue reading